The state government has committed an extra $355 million to help farmers and rural communities struggling with the drought.
The money is in addition to the almost $400 million announced during the March election campaign.
Agriculture minister Adam Marshall said it brought the government's total support bill to $1.8 billion.
"The impact of this drought is being felt everywhere and by everyone right across country NSW," Mr Marshall said.
"It's hurting our farmers, but also our local businesses, schools and people's overall mental health - there's been no decent rain and cash is also running dry.
"(This) new drought assistance package recognises the challenges on the land and the fact that 97 per cent of the State is still in the grip of drought or intense drought conditions.
"The best drought support is rain and lots of it, but while no government can make it rain, this new and additional funding is the next best thing.
The new package targets farmers who might be having cash flow issues, and will help to reduce the cost of doing business, help retain breeding herds with more help for stock and fodder transport, and help communities to "build resilience".
"While droughts are a natural part of doing business on the land, this drought is unique and I'm confident this package will help alleviate the some of the burden associated with one of the worst droughts in living memory," Mr Marshall said.
The announcement will be fully funded in next week's state budget and start on July 1.
Mr Marshall said that more than 140,000 farmers across the state had already benefited from the government's drought support package, "through the various fee waivers, subsidies, grants and no interest loans"
Under today's announcement, $170 million has been reserved for a special purpose Drought Infrastructure Package, including:
- Up to $120 million to fast track identified major infrastructure projects;
- $30 million on new groundwater supply for Dubbo;
- $8.2 million construction of second water storage at Nyngan
- $2.2 million to augment bore water supply at Coonabarabran;
- $2 million for Albert Priest Channel critical maintenance (Nyngan and Cobar); and
- $1.97 million towards the Coolamon Industrial Estate development.
An additional $185 million in Budget funding will go towards on-farm drought support measures, including:
- $70 million for transport subsidies (stock, fodder and water);
- $50 million to waive Local Land Services rates;
- $30 million to waive fixed charges for NSW Water Licences;
- $15 million for emergency water carting; and
- $10 million to waive interest charges for Farm Innovation Fund loans.